Chambal Fertilisers (CHAMBLFERT) Q2 FY27 Profit Squeeze Widens as Costs Outrun Revenue
Chambal Fertilisers' Q2 FY27 revenue grew 9% year-on-year, but net profit fell 2.6% as a massive spike in interest costs and depreciation compressed margins.
Chambal Fertilisers posted a 9.1% YoY revenue rise in Q2 FY27, but net profit declined 2.6%. The squeeze came from a 2,417% surge in interest costs and higher depreciation, pushing the net profit margin down 110 basis points from a year ago.
For Chambal Fertilisers, the September quarter was a story of growth that never reached the bottom line. Revenue climbed on higher production and a new industrial chemicals plant, but profit slipped as a surge in borrowing costs and depreciation ate into margins.
The numbers show the tension. Revenue rose 9.1% year-on-year to ₹6,999 crore, while net profit fell 2.6% to ₹632 crore. Sequentially, a 39% revenue jump from a low Q1 base delivered only a 21% profit increase. The net profit margin compressed to 9%, down 110 basis points from last year.
Revenue & profit
Revenue (₹ Cr)
Profit (₹ Cr)
Net Profit Margin
| Metric | CurrentQ2 FY27 | PreviousQ1 FY27 | Same quarter LYQ2 FY26 |
|---|---|---|---|
| Revenue (₹ Cr) | 6,999.5YoY +9.1% | 5,027.0 | 6,412.8 |
| Profit (₹ Cr) | 631.9YoY -2.6% | 523.6 | 648.8 |
| Net Profit Margin | 9.0%YoY -11% | 10.4% | 10.1% |
Why the profit didn't follow sales
Higher urea production and the launch of a Technical Ammonium Nitrate (TAN) plant drove the top line, as noted by ScanX.Trade. But costs grew faster. Finance expense soared to ₹22.4 crore from just ₹0.9 crore a year ago—a 2,417% increase.
This spike stems from a sharp rise in borrowings to fund working capital, reports FlashFinance. Subsidy receivables have ballooned, tying up cash and forcing the company to borrow. Depreciation also rose 16% year-on-year as new assets like the TAN plant came online.
The cash flow conundrum
Robust profits are not translating into cash. For the first half of FY27, operating cash flow was negative ₹1,283 crore, exceeding the period's net profit, according to FlashFinance. This working capital strain is a direct result of delayed government subsidy payments, a structural risk for the sector.
The company declared a ₹5 per share interim dividend, signaling confidence in liquidity. Yet, with subsidy receivables at ₹41,573 crore as of September 30, up from ₹18,110 crore a year ago per ScanX.Trade, the balance sheet is under clear pressure.
How long can this last?
The margin squeeze is likely to persist as long as subsidy delays continue. Management provided no explicit guidance in its Q2 presentation, reports Multibagg.ai. The near-term outlook hinges on government disbursements and the ramp-up of the new TAN segment, which contributed ₹669 crore in revenue this quarter.
Foreign portfolio investors reduced their stake by 1.5 percentage points in the September quarter, data from FundTrackerIndia shows. Domestic institutions bought in, but the FPI exit suggests caution over these profitability and cash flow challenges.
Key Points
- Revenue growth of 9.1% YoY was overshadowed by a 2.6% decline in net profit due to surging finance and depreciation costs./n- Net profit margin fell 110 basis points YoY to 9%, as interest expense jumped 2,417% on higher working capital borrowings.
- Operating cash flow was deeply negative in H1 FY27, driven by a massive increase in subsidy-related receivables.
- The new Technical Ammonium Nitrate plant contributed revenue but also added to depreciation, with its full margin potential yet to be realized.
Hexa Perspective
Chambal's quarter reveals the core vulnerability of a fertiliser leader: it can produce and sell profitably, but cannot collect cash on time. The 9% PAT margin is now below its TTM average of 9.2%, and the interest cost surge is a direct tax on delayed subsidies.
The TAN diversification is a necessary long-term hedge, but it does not solve the short-term working capital crunch. Investors are weighing a cheap valuation—a P/E of 8.7 against an industry average of 21.9—against the risk that subsidy delays become a permanent drag on returns.
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